THE DESCARTES SYSTEMS GROUP INC.

Income tax expense (recovery) is incurred in the following jurisdictions:
Year Ended January 31, January 31, January 31,
2011 2010 2009
Current income tax expense
Canada 487 (75) (122)
United States 311 794 409
Other countries (521) 136 (31)
277 855 256
Deferred income tax recovery
Canada (3,245) (2,126) (13,495)
United States 4,831 (7,004) 3,650
Other countries (5,469) 650 (1,890)
(3,883) (8,480) (11,735)
(3,606) (7,625) (11,479)
In 2011, our income tax recovery was impacted by the release of valuation allowance in the Netherlands and
United Kingdom. This recovery was partially offset by the net of (i) amendments to the prior-period United States
tax returns which resulted in a reduction of prior year tax loss carryforwards; (ii) taxation of unrealized foreign
exchange losses in Sweden; (iii) an adjustment to the calculation of the United States tax loss carryforwards; (iv)
the revised treatment of non-deductible acquisition-related costs; (v) charging of the tax effect of gains and losses
included in other comprehensive income directly to other comprehensive income; (vi) a change in the uncertain
tax positions; (vii) the revised treatment of certain assets as permanent differences rather than temporary
differences; (viii) the recognition of the Ontario harmonization tax credit and similarly the change in the rate
applied for taxation of future scientific research and experimental development credits; and (ix) the adjustment to
deferred tax assets set up in Canada related to the writedown of assets not currently deductible. In 2011, items (i)
through (ix) have resulted in a $0.9 million, $0.3 million and $0.1 million decrease in deferred income tax
expense in Canada, Sweden and the Netherlands, respectively, and a $2.1 million increase in deferred income tax
expense in the United States. These items also resulted in a $0.4 million and $0.2 million decrease in current
income tax expense in Sweden and the United States, respectively. While the circumstances resulting in these
adjustments occurred in prior periods, the net $0.8 million deferred income tax expense and $0.6 million current
income tax recovery from these adjustments was not material to our prior-period consolidated financial statements
or these consolidated financial statements for the period ended January 31, 2011 and has, therefore, been adjusted
in the year ended January 31, 2011.
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